NGI The Weekly Gas Market Report / NGI All News Access

FERC Rejects Bid to Reinstate Pre-Existing Time Limit to Bring Manipulation Complaints

FERC last Wednesday rejected a rehearing request seeking to reinstate a preexisting statute of limitations for parties to bring complaints alleging violation of the agency's new regulations targeting manipulation in the natural gas and electricity markets.

Rosemead, CA-based Edison International power generation affiliates, Edison Mission Energy, Edison Mission Marketing & Trading Inc. and Midwest Generation EME LLC, asked the Federal Energy Regulatory Commission to adopt a pre-existing 90-day limitation on complaints or enforcement actions as part of its more modern and broader anti-manipulation rule (Order 670), which was adopted in January.

The pre-existing time limitation under FERC's former market behavior rules required parties to bring a complaint within 90 days from the end of the calendar quarter in which a violation was alleged to have occurred, unless a complainant could show that it was unaware of the behavior that formed the basis for its complaint within that time period. The Commission rescinded the 90-day limit in February as part of its housecleaning effort to make way for the new anti-manipulation regulations.

The Edison International affiliates argued that the Commission failed to justify its reason for extending the statute of limitations to five years from the prior 90-day period. At the very least, FERC should have adopted a one-year limitation for bringing complaints under the updated anti-manipulation rule, which was patterned after the Securities and Exchange Commission's (SEC) regulation prohibiting manipulation and fraud in the securities industry.

The agency's new anti-manipulation regulations, which are based on the SEC's Rule 10b-5 that implements the requirements of the Securities and Exchange Act of 1934, make it illegal for any entity, directly or indirectly, in connection with the purchase or sale of natural gas or electric energy, or in providing transmission or transportation services subject to FERC regulation, to do the following: 1) defraud using any device, scheme or artifice; 2) make a false statement of material fact or omit a material fact; or 3) engage in any act, practice or course of business that operates or would operate as a fraud or deceit.

FERC took issue with the Edison affiliates' claim that it set a five-year statute of limitations in the anti-manipulation rule. "To the contrary, we explicitly said that the 'Commission declines to designate a statute of limitations or otherwise adopt an arbitrary time limitation on complaints or enforcement actions that may arise'" under the Natural Gas Act (NGA) and Federal Power Act (FPA), the order said [RM06-3-001]. Both the NGA and FPA are silent on the issue of statute of limitations, it said. As a result FERC is limited to the five-year statute of limitations found in the federal code when it seeks civil penalties for violation of its regulations, the agency noted.

The Commission also disputed the Edison affiliates' claim that the issue of the statute of limitations was not discussed prior to Order 670 being adopted. "Other parties commented on the time limitation appropriate for the new rule, including one party that specifically urged use of the 90-day period [that Edison] now advocates. Accordingly, [Edison] was on notice that the issue had been raised."

In addition, the agency dismissed the Edison affiliates' request for an alternative one-year statute of limitations to bring complaints, which FERC noted only applied to the private rights of action under SEC Rule 10b-5. And it rejected the affiliates' request for a technical conference on the issue.

"The Commission commenced this proceeding five months ago, and provided ample opportunity for the public to participate. [Edison], which chose not to participate directly, is now the only party seeking rehearing or asking for a technical conference. The Commission sees no reason to expend the agency's or the industry's resources to hold a conference. In our view, Order 670 provides the industry with adequate guidance as to how the new anti-manipulation rule will operate."

©Copyright 2006 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Copyright ©2018 Natural Gas Intelligence - All Rights Reserved.
ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus